Missouri governor bucks trend, campaigns for tax-cut veto

KANSAS CITY, Missouri (Reuters) - It is an uncommon sight in American politics - a governor barnstorming his state to rail against tax cuts.

But Missouri Governor Jay Nixon is on a campaign-style crusade to win public support for his veto of an income tax cut bill, even as state taxes nationwide are trending downward.

Nixon, a Democrat, has taken his case to towns across the state, arguing that corporate income tax cuts that are meant to draw business to Missouri would in fact harm schools and mental health services. Nixon has made 29 appearances since July 15 to defend his position.

Missouri lawmakers will meet Wednesday to vote on a veto override, which takes a two-thirds majority in the House and Senate, and even some Republicans admit that Nixon may win the fight.

"I want to leave this state better than I found it, and this bill would greatly limit that ability," said Nixon, who began his second four-year term in January and cannot run again due to term limits, in an interview. He calls the bill "flawed policy" that will not generate new business or jobs.

The House faces the bigger task as it needs 109 votes to override the bill, which got 103 votes in May. Nine lawmakers were absent, three of the Democrats.

"I find it very odd that the governor has spent 90 percent of the summer working against a tax-cut bill that passed with a super majority," said Missouri House Speaker Tim Jones, a Republican, in an interview. "He seems to be going against the stream."

If Nixon wins the tax battle, his strategy may become an interesting blueprint for Democrats in other conservative states who face a drive from Republicans and business groups for tax cuts.

The May tax-cut vote in Missouri broke largely along party lines in the Republican-dominated chamber, but some lawmakers are feeling strong local pressure to back Nixon, said Rep. T.J. Berry, sponsor of the bill in the House.

Berry said Republicans are fighting an uphill battle to get the two-thirds. "The percentage chance of an override is small, but we are still working at it," he said.

Missouri Republicans sought the tax cuts in response to reductions in other states, especially neighboring Kansas in 2012. The bill's supporters say Missouri must have a more attractive corporate tax climate to compete.

Missouri lawmakers are not alone in trying to reduce taxes this year. About $1.3 billion in tax cuts were approved by states in 2013, according to the National Conference of State Legislatures. While that is just .02 percent of total tax revenue, seven states - Alaska, Arizona, Iowa, Maine, North Dakota, Iowa and Wisconsin - cut taxes by more than 1 percent, according to the NCSL.

"This is the most activity we have seen in a long time," said Mandy Rafool, fiscal affairs specialist at the NCSL.

Missouri's effort to keep pace with Kansas is probably noticed in other states, said George Connor, a political science professor at Missouri State University in Springfield.

"It's a modern-day border war on who can lower taxes most," Connor said. "What happens here is on the radar because the same phenomenon may occur in other states, especially as industrial bases of states disappear."

The Missouri bill would cut the corporate tax rate in half - to 3.125 percent over 10 years. It would halve the income taxes a business owner declares on a personal return over five years. The highest rate for all taxpayers would drop from 6 percent to 5.5 percent over 10 years.

Nixon's efforts to veto the bill have drawn a barrage of television and radio ads from advocacy groups, urging residents to express their views to lawmakers before the vote on Wednesday.

More than 80 school boards in Missouri have passed resolutions supporting the veto, according to the governor's office. They argue that revenue available for education would decline, forcing them to gut programs.

"When superintendents in these districts say that the bill will devastate a community, that goes a long way," said Sean Soendker Nicholson, executive director of Progress Missouri, a liberal organization that opposes the tax cuts.

Nixon said that several thousand teachers' jobs would be in jeopardy if the bill passes, resulting in larger class sizes and less effective schools. A major financial backer in the drive to block the tax cuts is the Missouri National Education Association, a teachers union.

A coalition called Grow Missouri comprises pro-business groups such as the Missouri Chamber of Commerce. It says the tax cuts will, over time, boost state revenue by drawing more business, jobs and tax dollars.

"The governor fails to recognize that this bill will put us in a position to grow revenues, protect education funding and even enhance it," said Anne Marie Moy, coalition spokeswoman.

Nixon rejected a request from Republican leaders to call a special session of the legislature for the purpose of exploring a compromise bill.

"When I sit across the table from business folks, they are not saying 'I need a break on my taxes,'" Nixon said. "What they are saying is we need trained workers and we need people with degrees."